History - Catching Counterfeiters:

Counterfeiters also produced fake coins. Since 'real coins contained the
true value in silver and gold, the counterfeiters could turn a profit
simply by withholding some of the gold or silver from the coin.

Generally, the counterfeiters. called "coneymen" in the vernacular of
the day, specialized within the illegal trade. Printers and coiners
manufactured the bogus money, which they then sold to passers. The
passers exchanged the counterfeits for real currency or goods. Often,
gangs of printers and passers worked together, generally infesting
particular regions, but sometimes branching out into other parts of the
country.

By the 1860s, an estimated one-third of
the currency in circulation was counterfeit.

Detecting the fraudulent money was relatively easy compared to catching
the
people responsible for it. The Treasury Department relied on the
Marshals to pursue the counterfeiters on a national basis. Detectives
were occasionally
hired as "Special Agents" of the Department, but this was usually on a
case-by-case basis when the evidence warranted the expenditure. Allan
Pinkerton, for example, got his start in detective work by breaking up a
major counterfeiting
bank in Illinois. But detectives were expensive.

Prior to the Civil War. the government did not want to spend the money
on fulltime investigators. Consequently. U.S. Marshals and their
Deputies developed many cases against counterfeiters. They requested
permission from the Department of the Treasury to hire local detectives
to work the case full time only after the Deputies had uncovered enough
evidence to give promise of a successful conclusion.

In conducting these investigations, the main problem confronting the
Marshals
and their Deputies was not the spurious currency, but the lack of real
money to
pay their time and expenses. Despite a recognition in Washington of the
scope of the problem, the Treasury Department consistently hedged on
paying the Marshals in advance for their efforts.

In April 1846, for example, Marshal John McLean of Ohio reported his
suspicions concerning a gang of counterfeiters in his district. "The
state officers, not being paid. will not act efficiently in this
business," he advised Secretary of the Treasury R.J. Walker, "nor can it
be expected that the Marshal shall seek
information on which to arrest these violators of the law without
compensation."
The Treasury Department remained unswayed.

In 1860, the problem grew to such large proportions that Congress
appropriated a special fund for the investigation of counterfeiting.
Unfortunately, the appropriation was only $10,000 and the Secretary of
the Treasury jealously hoarded it for major cases.